Book: Angel

angel“Angel: How to invest in technology startups — timeless advice from an angel investor who turned $100,000 into $100,000,000” by Jason Calacanis
  • “The world has trillions of dollars sitting in bonds, cash, stocks, and real estate, which is all really ‘dead money.’ It sits there and grows slowly and safely, taking no risk and not changing the world at all.”
  • “Wouldn’t it be more interesting if we put that money to work on crazy experiments like the next Tesla, Google, Uber, Cafe X or SpaceX?”
  • “If you want to double your money every seven to ten years or so, buying some reasonable combination of low-fee index funds is considered the best bet.”
  • “According to the SEC, an accredited investor includes anyone who:
    • earned income hat exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
    • has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).”
  • “There is a long-standing, and totally accepted, tradition of ‘advisors’ getting 10 to 50 BPS—basis points, or hundredths of a percentage point—over two or three years, for helping a startup.”
  • “The best angels in the world have four qualities, giving them the ability to (1) write a check (money), (2) jam out with the founders over important issues (time), (3) provide meaningful customer and investor introductions (network), and (4) give actionable advice that saves the founders time and money—or keeps them from making mistakes (expertise).”
  • “When I meet someone who is going into debt to self-fund their startup I get worried—especially if they have a family.”
  • “A down round simply means you’re going to change the value of the company, making the people who invested in the last round mark their investment down.”
  • “Once you have a Series A, the chief executive officer (CEO) is going to spend about 20 percent of their time ‘managing their board.’”
  • “Pro rata means you get to keep your percentage ownership in a company.”
  • “Being a board member or advisor is nice work if you can get it, but you have to be willing to put the work in over a decade in the tiny startups that need you before the bigger companies that don’t need you as much will let you join their boards.”
  • “You’re going to need to have a great lawyer, have clearly defined deals, and be selective about the people you partner with. Even when you do all of those things, you’re still gonna have people try to screw you. It’s the nature of money, power, and, most of all, shares in companies.”
  • “Life is short, you should spend your time working with the good people, and if you do get screwed, look at it as a small price to pay for getting that person out of your life.”
  • “There are a number of sites offering angel syndicates here in the United States including AngelList, SeedInvest, and Funders Club.”
  • “I advocate that new angels do ten small angel syndicates before they start doing direct investing.”
  • “Syndicates require very little paperwork and you can choose to invest without taking any meetings or doing any due diligence. The only thing you need to be able to do is prove that you’re an accredited investor here in the United States and have your wire transfer clear.”
  • Qualities to look for:
    • “A syndicate lead who has been investing for at least five years and has at least one notable, unicorn investment”
    • “A startup that is based in Silicon Valley”
    • “A startup that has at least two founders (with two, you have a backup in case one quits)”
    • “A startup that has a product or service that is already in the market (you’re not qualified to invest in startups that haven’t released their products—and frankly you don’t need to take this risk)”
    • “A startup that has either (a) six months of continuous user growth or (b) six months of revenue”
    • “A startup that has notable investors
    • “A startup that, pot-funding, will have eighteen months of cash remaining, commonly referred to as runway (ask the founder and syndicate lead how many months of runway they will have post-funding)”
  • “If you love taking risks and don’t mind being locked up for a decade, I could see you putting 10 to 20 percent of your bankroll into angel investing. If you can tolerate risk, but don’t love it, and you can handle being illiquid for a decade, I could see you putting 5 percent of your bankroll into angel investing.”
  • “For every startup you didn’t invest in, write clear notes on the reasons why you passed. You will look bak on these notes and learn exactly how bad you were at this, and over time see how much better you’ve gotten.”
  • “When you meet with follow investors, your goals are:
    • Figure out what they invest in and why.
    • Figure out what value they bring to startups.
    • Make sure they understand what value you bring to start-ups.
    • Ask them, ‘Have you seen anything interesting lately?’
    • Offer them, ‘I just invested in these two startups, which are exceptional. Would you like too get introduced to the founders?’
    • Determine if they prefer double opt-in introductions or blind introductions.”
  • “I’ve interviewed thousands of people as a journalist, podcaster, and investor, and in that time the best interviews are the ones that morph into conversations. In a conversations you don’t have a list of questions to run through, you have a discussion partner who you volley ideas back and forth with.”
  • “I ask how many full-time employees they have, how much money they’ve made, their funding history, how they acquire customers, and why they are building this business.”
  • “I try to choose companies based on the people running them, not the idea or market, because I’ve learned that no one can tell the future but I am an exceptional judge of talent.”
  • Questions to ask founders:
    • If the founder was introduced by Jane, ask “how do you know Jane?”
    • “What are you working on?”
    • “Why has this founder chosen this business?”
    • “How committed is this founder?”
    • “What are this founder’s chances of succeeding in this business—and in life?”
      • “Why now?”
      • “What’s your unfair advantage?”
    • “What does winning look like in terms of revenue and my return?”
  • “The big problem with ‘founders’ who build a feature that a market leader will inevitably get to—and I use quote here for a reason—is that they lack vision. The act of selecting a feature as their life’s work, as opposed to a full-blown product or a mission, disqualifies them from being a true founder.”
  • “It’s okay to start small, but it’s not okay to be a small thinker.”
  • “It’s not who gets there first. It’s who gets there first when the market’s ready”
  • Additional questions to ask founders:
    • “Tell me about the competition.”
    • “How do you make money?”
    • “How much do you charge customers?”
    • “How much does your average customer spend?”
    • “Tell me the top three reasons why this business might fail?”
    • “What did your parents do?”
  • “What a founder’s parents think of their path is critical, almost as critical as what the founders themselves think of their chosen path.”
  • “The number one reason a startup fails is that the founder gives up.”
  • “There is a new generation of fauxtrepreneurs out there now, who are obsessed with the startup ‘lifestyle,” and totally stoked to build a company when it’s easy, but who would never consider taking less than what they could make working for Google.”
  • “Another huge red flag is founders who won’t start working until they are funded.”
  • “When evaluating deals in Silicon Valley, there is no reason for you, a new angel investor, to invest in pre-traction startups.”
  • “Most founders will give their angel investors pro rata rights. If they don’t, something is off.”
  • “A quick way to understand the valuation is to ask the founder directly, ‘How did you arrive at that valuation?’”
  • “Is that valuation set in stone?”
  • “Instead of saying no, investors string along founders by saying things like ‘Let’s keep the dialogue open’ and ‘Let me check with my partners.’ These are code words for ’no,’ but dogged founders, of course, hear ‘heck yes’ when an investor says anything that is not ’no’.”
  • “New angels should meet founders at incubators but invest in them six or twelve months after they’ve graduated.”
  • “These days, I am most likely to tell founders ‘not yet’ when they ask me if I’m ready to invest.”
  • “A side letter is an agreement between the company and the investor in addition to the standard deal terms.”
  • “If a startup isn’t sending you monthly investor updates, it’s going out of business.”
  • “Angels want to feel needed, and founders who don’t make their angels feel needed have lost their most likely source of follow-on funding—their current investors.”
  • “I would like a monthly update from you that includes the key metrics for the business, as well as what you consider the wins and losses since the last email. I would like you to put requests for me and your other investors in the email as well. Every email should have how much cash you have left, your burn rate, and when you will be out of cash so that we can all plan for future raises.”
  • “When deciding to give a bridge, you need have a candid talk with the founders about that the bridge will accomplish, typically by having them present some goals and what the startup will look like when this new tranche of capital comes in.”
  • “Many founders are on what I call the ‘feature death march,’ believing that if they just add two or three more features to a product they will break out. Sometimes this happens. Most times it does not.”
  • “Some founders are on a ‘savior search,’ believing that if they just add one superstar to their team, everything will fall into place. Typically they think they just need a sales executive or a growth hacker. Sometimes this happens. Most times it does not.”
  • “Other founders are on a ‘partner parade,’ believing if they just land their one key partnership, they will break out. Sometimes this happens. Most times it does not.”
  • “First, is it true that this one event will change their trajectory? Second, is it possible to reach that event given these additional resources?”
  • “It sucks to lose, but the more time and energy you put into your losses, the more you will feel like a loser. Instead, you should have been quadrupling down on your winners and spending more time on them.”
  • “A CEO’s job is to smooth out the emotional roller coaster. Never let your team experience the same highs and lows you’re feeling because the odds are they aren’t built to handle these kinds of ups and downs like you are.”
  • “As an angel investor, your number one job, in my mind, is to be there for the CEO when they’re struggling, making sure they feel heard and that they know you are on their side. Sure, you can tell them where the land mines are and point them in the right direction, but you’re not going to be able to take over as the pilot.”
  • “It’s best to spend your effort on the things that you have complete control over, like your knowledge and work ethic. If you’re consistently learning and working hard—two things that are in your control—good things will happen.”
  • “In another five to ten years, things will change again, and the only way to understand where the market is going will be to study not just the market winners but the market failures—along with doing a postmortem on your own forecasting and behavior.”
  • “Lucky people surround themselves with the most successful people in the world and take chances. It isn’t hard or impossible. It just takes work.”

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